Liability insurance

Professional indemnity insurance

If you are in the business of selling your knowledge or skills, you may want to consider taking out professional indemnity (PI) insurance.

What you will be covered for

PI insurance protects your business against claims for loss or damage by a client or a third party if you have made mistakes or are found to have been negligent in some or all of the services that you provide for them. PI insurance will also cover legal costs.

Many professions are required to have PI insurance cover as a regulatory requirement or as a result of their professional authorisation. This includes solicitors, accountants, architects, mortgage intermediaries, insurance brokers and financial advisers. Many consultants, advertising and PR agencies, and designers also choose to have this type of insurance.

Ensure you are properly covered

One important aspect to bear in mind when considering PI insurance is that cover is usually on a claims-made basis. This means that the policy will only respond to claims that are made while the policy is 'live'.

So, if you plan to cancel your policy when you close your business or retire, you may need to arrange 'run-off' cover for a period of time afterwards.

Also, if you plan to change insurers, you will either need to arrange run-off cover or get agreement from your new insurer to accept new claims for prior incidents.

Keep everything well documented

One way to minimise such claims is to make sure projects are well documented. Ensure that you set out specific responsibilities in your contracts with clients beforehand and deal with complaints promptly.

As this is a specialist area of insurance you should take advice from a suitably experienced insurance broker. For help on consulting an insurance broker, see the page in this guide on how to seek specialist advice. If you choose to deal directly with an insurer, it's worthwhile checking that they are a member of the Association of British Insurers (ABI). Check that an insurer is a member of the ABI at the ABI website - Opens in a new window.

Subjects covered in this guide

• Introduction
• How liability insurance works
• Employers' liability insurance
• Public liability insurance
• Product liability insurance
• Insurance against pollution damages
• Property owners' liability insurance
• Professional indemnity insurance
• Directors' and officers' liability
• Seek specialist advice
• Here's how I checked what insurance I need

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